Beyond." "But economic conditions and other factors could push the realization of these benefits into a lumpy transition path several years into the future." Peso crisisThe primary economic wrench that threw off many expectations of NAFTA and colors any analysis of its impact was Mexicos devaluation of the peso less than a year after the trade agreement took effect. The action shocked international financial markets and plunged Mexico into one of its worst recessions. In December 1994, the devaluation dropped the Mexican peso from 3.5 per dollar to about 6.5. It averaged about 7.5 pesos to the dollar for most of 1996. In the first week of March, the peso weakened to about 8 to the dollar. While NAFTA critics blame NAFTA for Mexicos economic crisis, other observers say the interplay of complex financial, economic and political factors in 1994 forced the devaluation and triggered the recession. Rather than letting Mexico default on its debts, the Clinton administration scrambled to help with a $50-billion credit package $20 billion from the United States and the balance from the World Bank and the International Monetary Fund. NAFTA did not take place in an economic vacuum, David Gould, an economist with the Federal Reserve Bank of Dallas, stated in a study. The peso devaluation halted and reversed a growing trend for Mexicos economy and foreign investment, as well as for overall U.S.-Mexico trade. TradeOverall U.S.-Mexico trade has increased over the last two decades. Since 1993, annual bilateral trade has grown from $81.5 billion to a projected $128.1 billion for 1996.U.S. shipments to Mexico are dominated by intermediate goods used to make finished products, heavy machinery and tools, and chemicals. Mexico's sales to the United States are led by petrochemicals, steel, apparel and farm produce. Historically that growth has been uneven due to recurring periods of instability in the Mexican economy, reported a U.S. government-funded st...
